Brussels is pushing EU member states to agree to a $60 ceiling on global purchases of Russian oil in a bid to seal a long-sought deal to curb the Kremlin’s revenues from fossil fuel.
But EU diplomats said Poland, which is particularly keen to reduce Moscow’s income, was the main block in crunch talks ahead of a December 5 deadline, when a ban on Russian seaborne oil shipments into the EU kicks into place.
One said it was “worth fighting for a just cause, a more effective cap and stronger response to Russia than was envisioned originally”.
An agreement would pave the way for the implementation by the EU and G7 of the price ceiling — which would apply globally — following months of negotiations over its details. The European Commission has already dropped its suggested price from as high as $70 to meet Polish demands.
Brussels has also proposed that the ceiling be regularly reviewed to ensure it is “at least 5 per cent” below average market prices for Russian oil, according to people briefed on the matter.
Russia’s main export crude, Urals, has fallen to a significant discount to Brent, the world benchmark, after Russia’s invasion of Ukraine led European buyers to turn away. But EU member states are split over how big the discount would actually be, with some countries claiming the price of Urals has already fallen below $60 a barrel.
Most pricing agencies, which track trades in the market, have quoted a discount for Urals of between $20 and $25 a barrel in recent weeks, though some traders have suggested oil refineries in India and China have negotiated even cheaper prices. Brent traded at around $85 a barrel on Thursday.
The price-capping initiative has been championed by the US, which also wants to avoid a sharp fall in Russian exports that would in turn spark an inflationary rise in crude prices.
Rather than directly affecting EU member states, which will be constrained by the import ban, it is designed to keep oil flowing to countries such as India and China.
It is intended to have global reach because importers seeking insurance cover and shipping services from companies based in G7 and EU countries to transport Russian oil would need to observe the price ceiling.
Member states eager to hit Moscow harder wanted a price level of as little as $30, but EU officials feared this would prompt Russia to withdraw crude supplies.
Brussels put forward the proposal for a $60 limit on Thursday and also agreed to start talks on a ninth package of sanctions on Russia, a longstanding demand from hawkish member states including Poland and the Baltic countries.
Oil and gas exports are likely to account for 42 per cent of Russia’s revenues this year, around Rbs11.7tn ($191bn), the country’s finance ministry has said.
According to draft EU legislation enacting the price cap the allies would conduct their first review in January 2023, with follow-up discussions every two months thereafter. The market price would be calculated with the help of the International Energy Agency.
Additional reporting by David Sheppard